Global Courant 2023-05-22 21:34:35
The new refinery, owned by Africa’s richest man, is seen as the answer to continuing fuel shortages at Africa’s largest oil producer.
Nigeria commissioned the Dangote Refinery on Monday in hopes of turning the country into a net exporter of petroleum products, but analysts said securing crude supplies this year could slow full production.
The government of outgoing President Muhammadu Buhari sees the refinery as the answer to the persistent fuel shortages in Nigeria – most recently in the run-up to the controversial presidential elections in February.
Nigeria spent $23.3 billion on imports of petroleum products last year and consumes about 33 million liters (8.7 million gallons) of gasoline every day. The Dangote Refinery has a capacity of 650,000 barrels per day.
The plant plans to export the excess gasoline, turning Africa’s largest oil producer into an export hub for petroleum products. It also plans to export diesel, according to Aliko Dangote, Africa’s richest man, who financed the construction of the refinery.
The massive petrochemical complex, said to be the world’s largest single-train refinery, cost $19 billion to build after nearly a decade of delays — more than initially estimated at between $12 and $14 billion — and has outstanding debt of about $2.5 billion. $75 billion, according to the governor of Nigeria’s central bank.
The complex also has a 435 megawatt power plant, a deep-sea port and a fertilizer plant.
Speaking at the commission’s ceremony, Dangote said the priority was to ramp up production to ensure the refinery can fully meet Nigerian demand and eliminate “the tragedy of import dependency”.
The ceremony was attended by President Buhari.
Nigeria’s President Muhammadu Buhari speaks during the commissioning of the Dangote Refinery in Ibeju-Lekki, Lagos, Nigeria on May 22, 2023 (Temilade Adelaja/Reuters)
Raw supply problems
Dangote expects to start refining crude oil in June, but London-based research firm Energy Aspects said commissioning was a complicated process and it expects operations to start later this year and reach 50-70 percent next year , with a staggered process of other units in 2025.
The refinery needs a steady supply of crude oil, but oil production in Nigeria is declining due to oil theft, pipeline vandalism and underinvestment. In April, production fell to less than one million barrels per day (bpd), below Angola’s output.
Lower production would affect the state oil company Nigerian National Petroleum Corporation (NNPC)’s ability to honor an agreement to supply Dangote Refinery with 300,000 bpd of crude, said economist Kelvin Emmanuel, who wrote a report on oil theft last year.
NNPC, with a 20 percent stake in the refinery, has production sharing agreements with oil companies such as ExxonMobil, Shell and Eni and is entitled to a share of the crude, which it also trades with merchants for gasoline and diesel.
The refinery has not signed an agreement to buy from oil companies in Nigeria.
That could mean Dangote is importing crude from traders like Trafigura and Vitol, Emmanuel said, at a time when local refining was expected to save foreign exchange and keep prices lower.
However, Energy Aspects said that in the long run, the Dangote Refinery could end Nigeria’s gasoline shortage, reshape the gasoline market in the Atlantic basin and export diesel that meets European Union specifications.
